Reit manager says Singapore prime office rents to increase on tight supply

SINGAPORE (BLOOMBERG) - Singapore's prime office rents are set to extend gains this year as the number of new properties coming onto the market is limited, according to CapitaCommercial Trust Management (CCTM).

"The market is looking good as the supply is very tight this year, so the rise in rentals will continue," Ms Lynette Leong, CCTM's chief executive officer, said in an interview on Thursday (Jan 22). The company runs the biggest office real estate investment trust in Asia outside Japan.

Singapore's prime office rents are set to post their biggest increase in at least four years in 2014.

The office rent index for prime areas rose 8.7 per cent in the first nine months of last year, heading for its largest gain since 2010, when it was up 12 per cent, according to data from the Urban Redevelopment Authority. The URA figure for all of 2014 is due to be released on Friday.

Ms Leong said prime office rents rose 15 per cent last year, and will rise again in 2015, though she declined to give a specific prediction.

Companies involved in social media, technology and commodities are taking up space in Singapore's central business district, offsetting the cutbacks by investment banks, she said.

CapitaCommercial Trust, the listed Reit, reported a net property income for the quarter ended Dec 31 of $50.6 million, up 3 per cent from a year earlier. The trust's monthly average office rents rose 5.9 per cent to $8.61 dollars per square foot last year.

Ms Leong said the Reit management company has been signing longer leases on commercial properties in readiness for any softening in rents when a large supply of office space comes onto the market from 2016.

For example, leases on the trust's new CapitaGreen tower in the central business district are for four years, rather than the usual three, Ms Leong said.

About 1.15 million square feet of new office space will come on stream in 2015, rising to 1.6 million square feet in 2016 and 4.7 million in 2017, according to real estate broker Knight Frank.

Some 69 per cent of the CapitaGreen tower is leased at rentals ranging from $9.8 to $16 per square foot, Leong said.

CapitaCommercial Trust is partly owned by CapitaLand, South-east Asia's biggest developer. It is the biggest office Reit in Asia by market value, after Japan's Nippon Building Fund and Japan Real Estate Investment, according to data compiled by Bloomberg.

The trust, whose units rose 21 per cent last year, slid 1.6 per cent to $1.87 at 11.31am in Singapore trading.